March 12 (Reuters) - Jefferies LLC will pay $25 million to resolve U.S. criminal and civil investigations into its mortgage bond trading, after one of its former traders was convicted for defrauding clients, and authorities said they are investigating whether other individuals broke the law.

The settlements announced on Wednesday by the U.S. Attorney in Connecticut, the U.S. Securities and Exchange Commission and the FBI resolve charges that Jefferies failed to properly supervise traders who cheated clients that took part in a federal program to kick-start bond markets after the 2008 financial crisis.

“Jefferies management in the fixed income division learned of the fraud and did nothing to stop it, let alone report it,” FBI special agent in charge of the New Haven, Connecticut unit Patricia Ferrick said in a statement. “Such egregious conduct supports the $25 million dollar penalty and underscores the need to investigate and prosecute all responsible parties.”

Richard Khaleel, a Jefferies spokesman, declined to comment. The payout includes $14 million of fines and $11 million of restitution to customers, authorities said.

Now part of Leucadia National Corp, Jefferies agreed to a non-prosecution agreement with U.S. Attorney Deirdre Daly in Connecticut, in exchange for its cooperation and improved oversight of its employees.

Its settlements are among the first to address misconduct in the aftermath of the 2008 financial crisis.

They were announced five days after jurors in New Haven, Connecticut found former Jefferies trader Jesse Litvak guilty on all 15 counts he faced for allegedly defrauding clients on mortgage bond trades.

“Not only did management tolerate these illegal practices, but the culture within the division encouraged the fraudulent conduct,” Daly said in a statement. “Our investigation of individuals continues.”

LITVAK GUILTY VERDICT

Prosecutors accused Litvak of cheating clients out of more than $2 million from 2009 to 2011 by inflating prices, lying about how much Jefferies paid for bonds, and inventing sellers.

They said the United States was a victim because some clients had traded through an initiative to energize the mortgage bond market, and which was created through the $700 billion bailout known as the Troubled Asset Relief Program,

Lawyers for Litvak said throughout the trial that their client’s activity was considered normal at Jefferies and common in the bond industry, and that Jefferies left him alone until a major client objected and threatened to pull its business.

The defendant is expected to appeal his conviction. He had worked in a Jefferies office in Stamford, Connecticut.

In January, the government had disclosed that it was investigating fraud in the trading of residential mortgage-backed securities, including in transactions stemming from the bailout.

The SEC, in papers relating to the civil settlement, said Jefferies had a policy that required supervisors to review traders’ communications in order to flag misleading information provided to customers.

But it said these supervisors did not cross-check these communications against actual trades, or review Bloomberg group chats through which some misrepresentations were made.

“Had Jefferies better targeted its supervision to the risks faced by its mortgage-backed securities desk, many of the misstatements made by its employees could have been caught,” SEC enforcement director Andrew Ceresney said in a statement.